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The Efficient News Hypothesis Fallacy?

The theory behind the efficient market hypothesis as applied to asset prices was that they would reflect all the information known in the market, and therefore the real underlying value of the priced assets. Trouble is, investors are strategic, and so the more of them know about and believe in the EMH, the more of them can free-ride on the pricing information produced by other investors, and the less true the EMH becomes.

I think there is, or will soon be, a similar dynamic in news and content aggregation. The more people try to get their content from aggregators, free riding on the search costs of others, the lower quality the aggregators become. As more people rely more on content that bubbles up through recommendations, the more you'll get bubbles in attention that resemble asset bubbles.

The question is, what happens when attention bubbles pop? Do they pop? Attention spent isn't a tradable asset, probably entirely a sunk cost. Is spending attention on aggregated content any worse than on US Weekly?

Full post as published by T Sinister on September 14, 2009 (boomark / email).